Six weeks after Fidelity announced its first no-fee index mutual funds, it disclosed plans to add two more funds to that roster, doubling the number.
The Fidelity ZERO Large Cap Index Fund (FNILX) and Fidelity ZERO Extended Market Index Fund (FZIPX) will begin trading Sept. 18 and, like the two earlier ZERO funds, will be available to individual investors with no minimum investment.
(Related: Fidelity Unleashes No-Fee Index Funds)
The Fidelity ZERO Large Cap Index Fund will “normally” invest at least 80% of its assets in the common stocks of large-cap companies included in the Fidelity U.S. Large Cap Index, a proprietary float-adjusted, market capitalization-weighted, rules-based index, according to the firm’s registration filing with the Securities and Exchange Commission.
The ZERO Extended Market Index Fund will “normally” invest at least 80% of its assets in stocks included in the Fidelity U.S. Extended Investable Market Index, also a proprietary float-adjusted, market cap-weighted index but composed of U.S. mid- and small-cap stocks.
Both funds will attempt to replicate the returns of their benchmark indexes by investing in fewer stocks than included in the indexes, using statistical sampling techniques based on factors such as capitalization, dividend yield, price-to-earnings and price-to-book ratio and earnings growth. Both funds will also lend securities to earn income.
“Our ZERO fund lineup … [is] bringing innovation and value to investors, and we’re pleased so many investors have taken advantage of this offering,” said Kathleen Murphy, president of Fidelity Investments’ personal investing business, in a statement.
Fidelity’s first two no-fee index funds — Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX), which started trading Aug. 3 — have attracted $987.7 million in assets through Sept. 12, according to data from Morningstar.
“Fidelity is aiming to gain market share on its platform using its own ETFs and mutual funds and in partnering with iShares,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA. He expects Fidelity will launch additional no-fee funds in the coming months, likely including a proprietary bond index fund.
As for the newly announced funds, Rosenbluth says investors could use one or both as a complement to the other free funds already announced, “depending on their risk tolerance and time horizon.”
In its press release announcing the two latest no-fee funds, Fidelity again compared its expense ratios and minimums to those of comparable index funds from Vanguard and Schwab. The Vanguard 500 Index Fund (VFINX) and Schwab S&P 500 Index Fund (SWPPX) — comparable to Fidelity’s ZERO Large Cap Index Fund — charge 14 basis points and three basis points, respectively. While Schwab has no minimum investment Vanguard requires $3,000.
The Vanguard Extended Market Index Fund (VEXMX), comparable to Fidelity’s ZERO Extend Market Index Fund, charges 21 basis point and also requires $3,000. There is no equivalent Schwab fund.
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